Aug. 3 (Bloomberg) -- Evercore Partners Inc. agreed to buy
closely held International Strategy & Investment Group LLC in an
all-stock transaction as it seeks to expand its research and
trading business.

Evercore will issue as many as 8.1 million share
equivalents to buy both ISI and the 40 percent of its own
equities business that it doesn’t already own, according to a
presentation from the company today. Almost 70 percent of the
payout is contingent on the five-year performance of the
combined business, Evercore ISI Institutional Equities, after
the transaction closes, according to the presentation.

If the targets are met, the transaction would be worth $406
million based on Evercore’s Aug. 1 share price of $50.13.

Adding ISI, the firm co-founded by Ed Hyman that
specializes in selling research to hedge funds, would help New
York-based Evercore expand its trading business. ISI and
Evercore’s equities business generated about $230 million in
revenue from handling institutional investors’ trades in the
year that ended June 30, according to Evercore.

The deal is structured to reward market-share growth and
cost discipline, including requiring that the business aim for a
ratio of 55 percent compensation to revenue, Evercore said in a
presentation on its website. The transactions are expected to
immediately add to Evercore’s adjusted pro forma earnings per
share in 2015 and are potentially “meaningfully” accretive in
2016 and beyond, according to the presentation.

Performance Units

Thirty-two percent of the payment will be in so-called base
units, which will convert to 2.6 million shares over time and
won’t be tied to any performance requirements. The remainder
will be in performance units, which will convert to base units
if the business meets targets relating to operating margin and
earnings before interest and taxes, according to the
presentation.

Dana Gorman, a spokesman for Evercore, declined to say how
many of the units will be paid to ISI and how many will go to
the owners of Evercore’s business.

The combined business “will be one of the two leading
independent equity research, sales and agency trading businesses
in the U.S.,” Evercore said in a statement. ISI had 226 full-time employees as of June, while Evercore’s equities unit
employed about 80, according to the presentation.

The transaction is expected to close in the fourth quarter
of the year, according to the statement.

Publishing more equity research is a priority that will
help Evercore generate additional business underwriting stock
offerings, Chief Financial Officer Robert Walsh said in a June
presentation.

(Earlier versions of this story misstated the maximum
number of shares in second paragraph and maximum value in third
paragraph.)